Auto expansions slow on sales slump

Auto-makers’ expansion plans have hit a roadblock due to the ongoing industry sales slowdown.

Maruti Suzuki, the biggest carmaker, said it will likely be unable to stick to its original plan of commissioning its Gujarat plant by the end of fiscal 2015-16.

“The slowdown in the auto sector is very acute,” R C Bhargava, its chairman, said after the company’s annual general meeting.

Maruti was looking at adding an annual capacity of 2.5 lakh units with the Gujarat plant. The plan was to swell its total annual capacity to 20 lakh units.
The company, however, is reviewing previous sales projections in view of the changed situation. A decision on starting work on the proposed Gujarat plant would be taken after the review.

“The company may look at a delay of six months to one year. The Gujarat plant continues to hold a key role for the company in order to retain its leadership position, going ahead,” said Puneet Gupta, associate director, IHS Automotive Sales Forecast.

According to estimates, the current capacity utilisation for passenger vehicle-makers is about 60%, down from the peak 80% in 2011.

While companies such as Mahindra and Mahindra (M&M) and Hyundai India are on track with their investment plans, experts feel that some foreign players will have to squeeze their budgets for India operations due to the sharp decline in volumes.

“All indications are that the GDP will grow below 5%. The rupee is at an all-time low. We don’t see any change in the fundamentals, the situation will remain as difficult as before,” said Bhargava.

Concurred Gupta of IHS. “Most of the manufacturers are not looking at adding capacities as the environment continues to remain negative. For any expansions done by an auto company, even suppliers need to expand in a similar capacity.

As of now, there are no expectations of recovery at least for the next one year.
So, manufacturers are adopting a wait-and-watch policy.” With PTI